Real wages to fall 5% in Spain as unprecedented deficit cuts loom

Wages will fall 5% in real terms in Spain this year thanks a freeze in the minimum wage and price increases, according to Comisiones Obreras trade union confederation.

Suggestions that wages were too high were not backed by the evidence as seven million workers earned “significantly less” than 1000 euros a month, said General Secretary Ignacio Fernández Toxo in comments reported by Europa Press.

Toxo slammed plans to raise wages below the rate of inflation, describing them as “unfair” and “an error” and added that proposals to reduce compensation for dismissal, part of a programme of labour “reforms”, were non-negotiable.

Noting that credit wasn’t flowing, he instead called for reforms to the banking system and for banks to fix “part of the disaster they have caused.”

His Popular Party government is promising to stick to a 2012 target of cutting the deficit to 4.4 percent of GDP. However, in a note today credit rating agency Moody’s said the Eurozone’s fourth-largest economy faces an “unprecedented” challenge to meet deficit reduction targets with the economy expected to contract this year by up to 1%, AFP reported.